Good Moaning, Jean-Claude

Thursday, October 08, 2009

Well, earnings season started with a bang last night as Aloca delivered....errr.....actual earnings. Both operating and GAAP earnigns comfortably exceeded the consensus; while cost-cutting undoubtedly played a major part in the beat, it's also true that top-line revenues actually rose, defying the usual seasonal trend. (2002 was the last year that Q3 revenues exceeded Q2.) At this point, it would probably be churlish to point out that that 9% rise in revenues came in a month when aluminum prices actually rose 14%....

In any event, risk assets have unsurprisingly registered a solid performance overnight, and the DGDF crowd has gone to town in Asia. That trend will come under a bit of scrutiny today when Trichet conducts his post-ECB press conference.

Europe has been unusually vocal in complaining about both the strength of the euro and weakness of the dollar (and its Bretton Woods II parasitic hangers-on), so it will be interesting to see if they are preapred to do anything about it. Yesterday, The Boy Who Cried Wolf evidently produced a report suggesting that Europe is mulling some sort of policy prescription.

At the same time, however, money is draining out of the European money market as the take-up of new tenders has been miniscule. Given that EONIA has traded far, far through the ECB policy rate, this would imply decent upside to euro money-market rates. The euribor curve has started to tick lower, helped by heavy liquidation of call structures, presumbly by a fund well-known to be well-connected in the halls of Frankfurt.

Despite, this, much of the curve is still well higher (i.e., implying lower rates) than was the case just a month ago.
At this point, it's difficult to see the ECB changing policy. The markt (both money markets and equities) are suggesting that further limitless amounts of liquidity aren't really needed. Yet if they try to guide cash rates higher, they might find that the euro goes much further than they would like. Unilateral intervention would likely prove ineffective, and multilateral intervention simply isn't happening. So really, policy on hold and jawboning the euro is the only option open to the ECB at this point.

So when Jean-Claude Trichet opens his press conference by wishing us all a good afternoon, Macro Man plans to reciprocate and wish him a good moaning.

Posted by Macro Man at 9:36 AM  


That old barbarian relic that can’t even move the mouth plus has no ears at all is about the only one, granting JCTrichet her wish.

Anonymous said...
10:34 AM  

One wonders if/when the short gold players (JPM, HSBC, ...) will cover. If I remember correctly their positions are large enough to make a dent on earnings.

Anonymous said...
11:04 AM  

I'm not sure yet whether I like the results of AA.

Okay the operational margin rose to 18,6 % and the year 2009 now gives us an average of 8,4 %. In the past years the margin was about 30 %.

In the year 2008 the operational margin was distorted by the recalculation of the accrued pension benefits (serious change in discounting). I recalculated it and it was higher than the average. Okay there was a drop in alu prices in Q4-2008 but the company hedged.

Over the last quarter I think there was a slight reversal in this provision and we had the effect of inventory valuation (higher alu prices). Hard to estimate the impact but overall not sensational for a restocking period.

Anonymous said...
11:17 AM  

How much cash is actually still around looking for a home? I keep seeing quotes that cash levels at mutuals are down to levels not seen since 2007 mkt highs. So who is going to buy all these bank recapitalisation offerings? Asian interests again?

Oh and shout if you are a USD bull? (swishsh... tumbleweed rolls across the screen). Is that it ? The last bull been shot last night?

Richie Rich said...
11:56 AM  

1. Doesn't matter what we think of the AA earnings (one time sales, etc., contributing to the EPS). Any sane individual knows it's crap long run. But the market wants to go up, and up it will go.

2. Regarding the short positions in gold, I'm going to make the assumption that the only reason guys like JPM won't cover, is because they're "in-the-know" on future happenings, and can see it coming back down again. They know how to cut their losses, and won't hold something they think is going to kill them. Hmm...or would they (derivatives)?


Anonymous said...
11:57 AM  

I am telling you guys right now that these kinds of prices in gold create supply. All kinds of shit Australian companies are filing for IPOs or private offerings that have yesteryear's gold assets that wouldn't have a hope at $900, let alone $750. Now if only I can convince my coworkers that buying this stuff is insane and we shouldn't do it and just buy futures instead if we like gold....

Nemo Incognito said...
12:02 PM  

Richie Rich
one dollar bull here..

spagetti said...
12:48 PM  

One dollar bull here as soon as these trade tensions ratchet up properly. I'm a "hard catalyst" kind of guy, what can I say.

Nemo Incognito said...
12:50 PM  


these prices do create supply but I don't think it can happen in a hurry. Takes time to get gold out of the ground and in the system. And if you are seeing a speculative mania developing it doesn't really matter. I still think, as I've said before that Silver is the better play here but it tends to lag Gold and then spike up near the end of the hysteria. However, there is arguably more value in it and price appreciation potential.

I personally agree with buying the underlying itself, but it seems that if you can pick the right companies(ie those very marginal producers that you mention) they can offer a highly leveraged bet on the value of Gold.

thetrader said...
1:20 PM  

Yeah but as a private equity trade? That's like being a VC in 1999 and saying "no dude, its all good, by 2002 we'll be flipping this thing for 5x".

Dangerous game from where I am sitting, especially if the assets have limited exploration upside since they are in pretty well prospected areas unlike, say, Argentina as it pertains to say, Andean Resources.

Nemo Incognito said...
1:23 PM  

Trichet didn't even make an effort to jawbone the Euro down. Looks like the buck sinks or swims on its own merits.

Steve said...
1:58 PM  

I am sitting here kind of stunned, actually....I wonder if he's feeling OK? That was about as innocuous as saying "no comment"

Macro Man said...
2:00 PM  

It's almost worse, he said he supports the US' strong dollar policy, which means he supports a weak dollar. And the currency strength didn't even get an honorable mention as contributing to "price stability."

Steve said...
2:08 PM  

Now here's the "no comment..."

Steve said...
2:10 PM  

$ bull = 元 bull.

Shorts to cover + awful lot of 元 being printed… says $(=元)gold. To keep the growth on nominal target that “keeps the peoples happy”. No doubt.

Not a DGDF member, but not a $ bull here. Or a “moratorium” ¥ one. Not even €an cheerleader. £ is basket. That pretty much strikes me out of any type of (not so) S-DR fan club.

No comment indeed.

Anonymous said...
2:50 PM  

As long as we have a ton of people like 11:57 who don't believe that a company might possibly be able to turn a profit with "the lowest levels of inventory ever" in the system during a period of restocking, I'm still bullish on equities. In fact, I'm beginning to ponder whether we might see some sort "labor restocking" given how much payrolls have been slashed.

Also MM you should take a look at housing, which is showing signs of life.

Ian said...
3:28 PM  

YES Macro Man ...

Thanks for this! ... what a joke! Seriously, I turned off after the two first questions. He uses the same words, the same sentences, and even accentuates the same way.

Especially that one about how they don't like "excessive volatility in the currency markets" on the question concerning the Euro ...


CV said...
4:35 PM  

EU political system is dominated by socialists, similiar to the new coalition in Japan. Having a strong euro or yen for the left means the end of the dollar, multipolar world, and so on.

Strong currency is not good for the economies of these nations, but since when did the left care about that? Politics and US schadenfreude trump other concerns.

Crisis Management said...
4:39 PM  

this fight is getting exhausting


Anonymous said...
5:11 PM  

Nemo, all,

Check out charts of gold in ZAR and AUD - this is why there won't be a huge flood of gold out of these countries.

Anon (1104) and Ivan - don't even get me started on the gold short conspiracy theories, please!


Anonymous said...
5:42 PM  

This is my point with my coworkers: if your cash costs are largely in AUD or ZAR, every buck you make on the revenue side is probably going to be cut out from under you on costs.

Seriously, this is a futures ponzi scheme, the idea that "special situations" guys are getting into this is a good sign that we are probs less than half a year from a major, major top.

Nemo Incognito said...
5:48 PM  

Nemo, it's not a ponzi scheme if it never collapses. Dollar devaluation could help the US if it were done more abruptly.

Stick China with the bill, they wanted to run a vender financing program and now their customer is in default. Not a popular thing to say but there are few alternatives.

Crisis Management said...
5:57 PM  

Vendor, yeesh, my spelling is just terrible.

Crisis Management said...
5:58 PM  

Unfortunately so long as China is pegged Asia-ex exporters get screwed. Could it be that the rest of APEC goes feral on China because of this?

Nemo Incognito said...
3:04 AM  

technicals on Us treasuries starting to give me a feeling that we could see a spike upwards in rates. if the short end follows, that could cause a short squeeze in the $. that and the former might then puncture the wheels of the equity lamborghini..

spagetti said...
9:12 AM  

When does one expect the “economy to recover”? Chairman’s jaws were stretched to the point that the bone (& the rapidly crunching credibility) had to be “upheld” there a little by say an invisible hand; overnight, before an auction reopened an on the run security afternoon. Now one must again bail out a dealer or two - of its holdings. Hence it is not exactly “today” that the economy suddenly recovers. Neither did the probability that the branch of QE, that should have already ended, end (again), rise.

Anonymous said...
11:14 AM  

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